Tuesday, April 13, 2010

MINTING MONEY, in the Wild Wild West...(WABC, BMRC)

The old banker saying was "3-6-3."  As in, borrow (pay depositors) at 3%, lend at 6% (loans), and hit the golf course at 3pm.  The saying now could be updated to "0-6-Vegas," as banks now borrow for literally nothing, lend at nearly 6%, and the money rolls in so easy they can skip golf and head to The Palms...

Simply amazing, is all I can say.  San Rafael, California-based Westamerica Bancorporation (WABC) reported earnings that didn't exactly knock the cover off the ball this morning. Earnings per share of 80cents came in a penny ahead of expectations, and the stock is trading up 1% at $58.75, an all-time high.

What struck me as amazing was the bank's Net Interest Margin (the difference between what it pays for money and what it gets in yield on its loans.) of 5.6%, even higher than the 5.35% a year ago.  The bank is losing money on some of the deposit interest it is paying, but the money they're making on the net interest margin is so huge that it's a good customer-service move in the long-run.

That interest margin is enormous, placing WABC among the top ten publicly traded banks in that metric.  Joining them there is Bank of Marin(BMRC), located just a few miles away from Westamerica.

I know WestAmerica and Bank of Marin well.  These are some of the best bankers in the country, with a hawk eye for making solid loans.  However some of these extremely high Net Interest Margins at other California banks should make people (at the very least) dig deeper into the loan portfolio.  WestAmerica's appears to be performing quite well, according to data from WMLab:

Copyright 2010 AlphaNinja

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